13 terms

ENGR 112 Raising Capital

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Entrepreneurial Finance Framework
Novelty of Business Model vs Capital to reach pos. cash flow
small businesses (personal credit; bank loans)
new tech (angel investors; venture capital)
capital-intensive, proven tech (commercial banks; project finance; strategic investors)
capital-intensive, new technologies (hard to fund w/out govt support
Financing Models
• Bootstrapping
• Debt Financing
• Equity Financing
• Seed & Early Stage
• 1st , 2nd , 3rd Rounds: Professional Investors
- VCs (Institutional)
• Strategic
- Later Stage / Growth Stage
• Private Equity
• Initial Public Offering (IPO)
High-Growth Venture Life Cycle
Seed, Startup, First Round, Second Round, Third Round, Expansion, Management Buyout, Work-out
Seed
Identify opportunitites and develop business model
Startup
Experiement to develop product; engage market
First Round
Launch first product; develop marketing, sales, and distribution
Second Round
penetrate initial markets; show ability to generate revenue
Third Round
Show steady increase in revenue; achieve profitability
expansion
establish privately held company, pursue aggressive growth
management buyout
operating management acquires business or division
work-out
troubled company with plan for turnaround
Structure of Venture Capital Fund
Pension Funds, Endowments, Wealthy Families (limited Partners)
Venture Capital Fund 1
Portfolio of Ventures
Initial PublicOffering (IPO)
• Transition of Private Company to a Public Company
• Shares of the company are sold to Institutional Investors (banks pension funds etc )
Used for:
• Raise expansion capital
• Monetize investments by early private investors
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